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Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach

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  • Cardullo, Gabriele

    () (Université catholique de Louvain)

  • Van der Linden, Bruno

    () (IRES, Université catholique de Louvain)

Abstract

The search-matching model is well suited for an equilibrium evaluation of labor market policies. When those policies are targeted on some groups, the usual juxtaposition of labor markets is however a shortcoming. There is a need for a setting where workers’ productivity depends on employment levels in all markets. This paper provides such a theoretical setting. We first develop a streamlined model and then show that it can be extended to deal with interactions among various labor market and fiscal policies. Simulation results focus on the effects of employment subsidies and in-work benefits and on their interactions with the profile of unemployment benefits and with active labor market programs.

Suggested Citation

  • Cardullo, Gabriele & Van der Linden, Bruno, 2006. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," IZA Discussion Papers 2073, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2073
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Brown, Alessio J.G. & Merkl, Christian & Snower, Dennis J., 2011. "Comparing the effectiveness of employment subsidies," Labour Economics, Elsevier, vol. 18(2), pages 168-179, April.
    2. Osuna Victoria, 2009. "Taxing Overtime or Subsidizing Employment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-28, October.
    3. Philip Schuster, 2010. "Labor Market Policy Instruments and the Role of Economic Turbulence," University of St. Gallen Department of Economics working paper series 2010 2010-29, Department of Economics, University of St. Gallen.
    4. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.
    5. Hassan Molana & Catia Montagna, 2015. "Selection, Trade, and Employment: the Strategic Use of Subsidies," WWWforEurope Policy Paper series 21, WWWforEurope.
    6. Oskamp, Frank & Snower, Dennis J., 2007. "Interactions between employment and training policies," Kiel Working Papers 1389, Kiel Institute for the World Economy (IfW).
    7. Jahn, Elke J. & Wagner, Thomas, 2008. "Do Targeted Hiring Subsidies and Profiling Techniques Reduce Unemployment?," IZA Discussion Papers 3768, Institute for the Study of Labor (IZA).
    8. Ann-Sofie Kolm & Mirco Tonin, 2011. "In-work benefits and unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(1), pages 74-92, February.
    9. Victoria Osuna, 2009. "Should we tax overtime, subsidize the wage or subsidize employment?," Working Papers 09.03, Universidad Pablo de Olavide, Department of Economics.
    10. Conny Wunsch, 2013. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1030-1045, July.
    11. Bucher, Anne, 2010. "Impacts of hiring subsidies targeted at the long-term unemployed on the low-skilled labor market: The French experience," Economic Modelling, Elsevier, vol. 27(2), pages 553-565, March.
    12. repec:wfo:wstudy:57894 is not listed on IDEAS
    13. Oskamp, Frank & Snower, Dennis J., 2006. "The effect of low-wage subsidies on skills and employment," Kiel Working Papers 1292, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    labor market programs; reductions of social security contributions; unemployment insurance; unemployment; wage bargaining; search-matching equilibrium;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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